Okay, so this feels like a grim subject however when you die a solicitor will be appointed, they are legally required to gather details of your estate and inform the tax man of the total value. The tax man now calculates how much your beneficiaries owe him in Inheritance Tax BEFORE any money, property, investments etc. are released to them.
Hopefully you will have made a will within which will be a discretionary trust – this not only defines who gets what but can also mitigate the amount of Inheritance Tax that could be due in the future on your beneficiary’s own estates.

But how can you help as a financial adviser?

Firstly we can look at your existing investments that may or may not be written into trust. If you have any investments that are not written in trust we can organise various trusts to reduce your inheritance tax liability. We go beyond the will trust arrangements that are put in place by solicitors, as we are able to consider other trust arrangements that solicitors are unable to do, which can be used to mitigate your inheritance tax liability.

Example trusts that you might consider:

Discounted Gift Trust – This is ideal for client's who want to reduce the value of their estate immediately but also require fixed regular payments from their capital.
Gift & Loan Trust (also known as Loan Trusts) – Ideal for clients who want to receive regular payments and/or access to their original capital, while gradually reducing their estate
Bare Trust - are particularly useful for parents or grandparents who wish to pass on assets to their children or grandchildren. The named beneficiary has what is known as ‘absolute entitlement’ to the assets that are placed in trust, but they will be held in the name of the trustee until the child reaches the age of 18. At this point the beneficiary will be immediately able to call on the assets; the trustees will have no discretion over whether or not they should receive them.
Discretionary Trust - A discretionary trust is a very flexible type of trust. The trustees of the trust own the trust’s property on behalf of the beneficiaries. The beneficiaries need not all even be born at the time the trust is created. The trustees can pay out income or capital to any one or more of the beneficiaries entirely at their own discretion. No beneficiary has a right to demand income from a discretionary trust.
Pension Trust - This basic definition of a trust has to be refined for a pension scheme because very often it is the case that the beneficiary/scheme member is putting money into the scheme for his own benefit. Also, there is judicial recognition that even when money is paid into a pension scheme by employers in respect of its employees that this is not a gift (which is normally the case when most settlors make such payments e.g. payments into a family trust) . Contributions to a pension scheme by an employer are regarded effectively as deferred remuneration under the employees’ contracts of service.
We can also consider a whole of life insurance policy. For a couple this is usually taken out on a Joint Life, second death basis – which means that the policy pays out after both individuals have died. This is written in trust for your beneficiaries (e.g. your children / grandchildren). By writing this in trust it means the payment of the insured life cover amount bypasses probate – this means that a payment will be received by your beneficiaries much earlier as probate can usually take several months to sort out. More importantly it also bypasses your estate, this means that is passes to your beneficiaries TAX FREE. This is often an expensive policy to take out however it all depends on the determination of the couple to ensure something is left to their beneficiaries. It can also be used to cover a known IHT liability payment which could mean that existing property / investments would not need to be sold to pay for a tax bill.

What should I do if I want to talk to you further regarding inheritance trust planning?

It is simple – just complete the enquiry form below and send us your details. One of our advisers will contact you and discuss your query. Alternatively you can call us on 01274 516900.